Accounting Principle 12th Edition International Student By Paul – Test Bank

SOLUTIONS TO BRIEF EXERCISES

BRIEF EXERCISE 11-1

(a) A note payable due in two years is a long-term liability, not a current
liability.

(b) $30,000 of the mortgage payable is a current maturity of long-term debt. This amount should be reported as a current liability; the remainder should be reported as a long-term liability.

(d) Accounts payable is a current liability because it will be paid out of current assets in the near future.

BRIEF EXERCISE 11-2

July 1 Cash 60,000
Notes Payable 60,000

Dec. 31 Interest Expense 3,000
Interest Payable
($60,000 X 10% X 1/2) 3,000

BRIEF EXERCISE 11-3

Sales tax payable
(1) Sales = $15,600 = ($16,380 ÷ 1.05)
(2) Sales taxes payable = $780 = ($15,600 X 5%)

Mar. 16 Cash 16,380
Sales Revenue 15,600
Sales Taxes Payable 780

BRIEF EXERCISE 11-4

Cash 840,000
Unearned Ticket Revenue 840,000
(To record sale of 4,000 season tickets)

Unearned Ticket Revenue 70,000
Ticket Revenue 70,000
(To record basketball ticket revenues earned)

BRIEF EXERCISE 11-5

(a) Working capital = $4,594,772 – $1,717,728 = $2,877,044 (thousand)
(b) Current ratio = $4,594,772 ÷ $1,717,728 = 2.67:1

BRIEF EXERCISE 11-6

Dec. 31 Warranty Expense 4,500
Warranty Liability 4,500
[(1,000 X 5%) X $90]

BRIEF EXERCISE 11-7

Gross earnings:
Regular pay (40 X $16) $640.00
Overtime pay (5 X $24) 120.00 $760.00

Gross earnings $760.00
Less: FICA taxes payable ($760 X 7.65%) $ 58.14
Federal income taxes payable 95.00 153.14
Net pay $606.86

BRIEF EXERCISE 11-8

Jan. 15 Salaries and Wages Expense 760.00
FICA Taxes Payable ($760 X 7.65%) 58.14
Federal Income Taxes Payable 95.00
Salaries and Wages Payable 606.86

Jan. 15 Salaries and Wages Payable 606.86
Cash 606.86

BRIEF EXERCISE 11-9

Jan. 31 Payroll Tax Expense 11,080
FICA Taxes Payable ($80,000 X 7.65%) 6,120
Federal Unemployment Taxes
Payable ($80,000 X .8%) 640
State Unemployment Taxes Payable
($80,000 X 5.4%) 4,320

BRIEF EXERCISE 11-10

(a) Timekeeping (c) Preparing the payroll
(b) Hiring employees (d) Paying the payroll

*BRIEF EXERCISE 11-11

Jan. 31 Vacation Benefits Expense (70 X $120) 8,400
Vacation Benefits Payable 8,400

SOLUTIONS FOR DO IT! REVIEW EXERCISES

DO IT! 11-1

1. $70,000 X 6% X 5/12 = $1,750
2. $42,000/1.05 = $40,000; $40,000 X 5% = $2,000
3. $45,000 X 2/6 = $15,000

DO IT! 11-2

(a) Current liabilities
Notes payable $ 40,000
Accounts payable 63,000
Long-term debt due within one year 90,000
Unearned service revenue 70,000
Salaries and wages payable 32,000
Lawsuit liability 25,000
Total current liabilities $320,000

(b) Working capital = Current assets – Current liabilities = $570,000
– $320,000 = $250,000
Current ratio: Current assets ÷ Current liabilities = $570,000 ÷
$320,000 = 1.78:1

DO IT! 11-3a

(a) Net pay: $80,000 – (7.65% X $80,000) – $14,000 – $1,600 = $58,280

(b) Salaries and Wages Expense 80,000
FICA Taxes Payable 6,120
Federal Income Taxes Payable 14,000
State Income Taxes Payable 1,600
Salaries and Wages Payable 58,280

DO IT! 11-3b

Payroll Tax Expense 16,620
FICA Taxes Payable ($120,000 X 7.65%) 9,180
Federal Unemployment Taxes Payable 960
State Unemployment Taxes Payable 6,480